Correlation Between Fast Retailing and ULTRA CLEAN

Can any of the company-specific risk be diversified away by investing in both Fast Retailing and ULTRA CLEAN at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fast Retailing and ULTRA CLEAN into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fast Retailing Co and ULTRA CLEAN HLDGS, you can compare the effects of market volatilities on Fast Retailing and ULTRA CLEAN and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fast Retailing with a short position of ULTRA CLEAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and ULTRA CLEAN.

Diversification Opportunities for Fast Retailing and ULTRA CLEAN

0.5

Correlation Coefficient

Fast Retailing  ULTRA CLEAN

Very weak diversification

The 3 months correlation between Fast and ULTRA is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and ULTRA CLEAN HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ULTRA CLEAN HLDGS and Fast Retailing is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fast Retailing Co are associated (or correlated) with ULTRA CLEAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ULTRA CLEAN HLDGS has no effect on the direction of Fast Retailing i.e., Fast Retailing and ULTRA CLEAN go up and down completely randomly.

Pair Corralation between Fast Retailing and ULTRA CLEAN

Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.59 times more return on investment than ULTRA CLEAN. However, Fast Retailing Co is 1.7 times less risky than ULTRA CLEAN. It trades about 0.17 of its potential returns per unit of risk. ULTRA CLEAN HLDGS is currently generating about 0.0 per unit of risk. If you would invest  29,610  in Fast Retailing Co on September 21, 2024 and sell it today you would earn a total of  1,910  from holding Fast Retailing Co or generate 6.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Fast Retailing Co  vs.  ULTRA CLEAN HLDGS

Fast Retailing

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Fast Retailing is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ULTRA CLEAN HLDGS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, ULTRA CLEAN may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fast Retailing and ULTRA CLEAN

The main advantage of trading using opposite Fast Retailing and ULTRA CLEAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, ULTRA CLEAN can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ULTRA CLEAN will offset losses from the drop in ULTRA CLEAN's long position.

The idea behind Fast Retailing Co and ULTRA CLEAN HLDGS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.